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Thursday, November 19, 2015

Immune Making Progress, Despite Share Price Declines

Immune Pharmaceuticals (NASDAQ:IMNP) has released some positive news over the past few weeks, but you would not know that based on the stock price. Immune shares are down 64% over the past year despite what is meaningful progress on the pipeline. Below I highlight the recent progress and provide a brief update on the story following some recent developments.

It's Not About AmiKet: In my opinion, investors are too focused on the partnering status of AmiKet, a Phase 3-ready drug that management previously guided they would secure a deal for over the summer 2015. When offers for AmiKet came in a few months ago, they were lower than management was willing to accept, primarily based on concerns over the intellectual property life of the drug. AmiKet is a topical analgesic for the treatment of peripheral neuropathies such as post-herpetic neuralgia and diabetic peripheral neuropathy. The product contains two FDA approved drugs, amitriptyline (4%) and ketamine (2%), and is designed to compete against Lyrica® ($5.2 billion in sales in 2014 at Pfizer) and Lidoderm® ($1.3 billion in sales in 2012 at Endo). Unfortunately, the patent on AmiKet expires in August 2021, and thus the NPV for a larger pharmaceutical partner does not match up with what Immune believes the drug is worth.

Instead of taking less money for the drug over the summer, management went out and licensed a nanoparticle delivery formulation in June 2015. The benefits of the nano-formulation are improved delivery and patent protection to 2036. Development of AmiKet-Nano is now being packaged in with the Phase 3-ready formulation and management is back out re-entertaining offers for the drug. Investors are squarely focused on the deal, hoping that out-licensing AmiKet will provide non-dilutive cash to fund the inflammatory and immuno-oncology pipeline. That certainly is the goal, but AmiKet is not the investment story for Immune. Yes, I ultimately believe a deal for AmiKet will get done, but investors need to focus on the more important drivers of long-term value for the shares, which is primarily bertilimumab for bullous pemphigoid (BP) and inflammatory bowel disease (IBD).

Bertilimumab Phase 2 BP Trial Now Enrolling: Immune Pharma is currently conducting a Phase 2a open-label study in adult patients with newly diagnosed, moderate to extensive BP (NCT0222146). I've already written significantly on this trial, so  I will not cover the background in this article. Instead, I'll point investors to my article from September 2015 >> HERE <<.

However, I do think it is important to cover some recent news on bertilimumab in BP that the market seems to have missed. Last week, the company announced the U.S. IND for bertilimumab has been cleared, and the first clinical sites in the U.S. should open shortly. Right now the only site enrolling patients is in Israel. Immune only filed the IND in October 2015, meaning the FDA had no comments or revisions to the application, and acceptance took only 30 days. For a management team that has been maligned for not delivering on the AmiKet partnership, execution around bertilimumab over the past few months has been spot on.

The more sites Immune can open and enroll patients at with bertilimumab in this Phase 2a study, the sooner we will see data. This is an open-label study designed to show a reduction in BP disease severity and a reduction of use in high dose steroids. Target enrollments is 10 to 15 patients. The opening of the U.S. IND was a very positive event and the market oddly ignored it.

Bertilimumab Phase 2 UC Trial Now Enrolling: The story with bertilimumab in ulcerative colitis is also gaining steam. Immune is currently conducting a Phase 2 clinical trial (NCT01671956) seeking to randomize 42 adult patients with active moderate-to-severe UC at number of centers in Israel and Europe. In fact, the first patient was enrolled earlier this week. Similar to the path in BP, Immune will file a U.S. IND shortly that will likely get cleared to open sites in the U.S. in early 2016. They have some pretty heavy-hitters in the IBD space lined up as potential investigators, including Dr. Brian Feagan, MD, Professor of Medicine, University of Western Ontario, CEO of Robarts Research Institute and a top worldwide expert for Crohn's disease. Dr. Feagan has published more than 120 peer-reviewed articles and he is currently a reviewer for the New England Journal of Medicine, Gastroenterology, and the American Journal of Gastroenterology. He brings some impressive credibility to the story.

Zacks Analyst, David Bautz, PhD. points out in this most recent update on Immune that the Celgene acquisition of Receptos for $7.2 billion is a good potential comparable for what Immune could be worth if bertilimumab makes it as far in development. Of course, the data needs to be as good as ozanimod (Phase 3 for ulcerative colitis), but this is what biologic drugs for IBD and inflammatory diseases are worth - billions of dollars. He states, "The potential value of bertilimumab is not accurately reflected in the company’s current stock price." I agree with this assessment, and encourage investors to learn more about bertilimumab in ulcerative colitis by reading my article from October 2015 >> HERE <<.

Financed Through Data: Immune reported third quarter financial results last week. I received a number of questions about the cash position. Immune exited the quarter with $9.0 million in cash and investments, strengthened by $13.5 million in financing in July 2015 and another $3.0 million second tranche just before the end of the quarter in September 2015. The company has the ability to borrow another $5.0 million under a revolving line of credit before June 2016. Burn in the third quarter was $5.4 million, well ahead of the previous two quarters in 2015 that totaled only $4.5 million together. The reason why burn was so high for the third quarter was that management prepaid a number of expenses associated with the two Phase 2 bertilimumab clinical trials. I do not expect the burn to continue at the rate seen in the third quarter 2015. In fact, burn should drop dramatically in the next few quarters back to approximately $2.5 to $3.0 million each. That makes the company's current cash balance and line-of-credit enough to fund operations for the next 12 months, which is plenty of time to report data on bertilimumab in BP, UC, and even partner AmiKet.

Insiders Have Been Aggressively Buying: Last month, Immune announced that the CEO, Dr. Daniel Teper, had established a 10b5-1 stock trading plan allowing for the purchase of up to $250,000 of common stock. Throughout 2015, Dr. Teper has purchased $148,000 worth of stock at an average price of $1.34 per share. He currently owns 4,557,905 shares. In addition, two members of the Board of Directors each purchases 50,000 shares of common stock at $1.47 and $1.48 per share, respectively, in September 2015.

Conclusion: Investment in Immune Pharmaceuticals is primarily about bertilimumab, currently moving forward in two Phase 2 trials for inflammatory diseases. Investor attention over the past few months has been mistakenly focused on the timing of a partnership for AmiKet, which I believe is missing the bigger picture. Bertilimumab could be worth billions if successfully commercialized. The Celgene acquisition of Receptos makes it clear that big pharma is interested in biologic drugs for inflammatory diseases like BP, UC and CD. Positive data from either of these programs set the stage for massive re-valuation of the shares. The company has enough cash to get through data from both Phase 2 trials in 2016. The stock has been under significant selling pressure, despite the fact that the investment thesis remains intact and execution over the past few months has been on plan.

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  1. Almost six months now and no word from Immune on the IND for UC

    1. Hi Tom,
      I asked DT about this in January 2016 at JPM16. He said the strategy with bert in UC in the US has changed because the FDA wants to see longer-term toxicology work before clearing the IND. This is likely due to the existence of medications and other blockbuster biologics to treat UC. This was not an issue with the BP trial because there are no approved drugs to treat BP and it's an orphan indication. So the FDA views the risk/reward at a different level than UC. Importantly, the dosing is the same so the company will be able to use the pk/pd data from the BP trial to supplement potential movement of bert into the US for UC or AD. DT said the next likely place to expand the UC trial beyond Israel is into Eastern Europe, but I do not have a sense of if/when that will happen.

      Whenever I speak to DT about bert the conversation always turns to AD. I think IMNP is become less interested in the crowded UC space and more interested in dermatology. They are looking to demonstrate proof-of-concept with bert in BP, a super small market, and then start a trial in AD, a much larger opportunity. I think ultimately if bert works in AD you will see them move forward there as the lead indication, and then see what data they get from the UC trial in Israel before they spend any money on bert in UC/CD in the US.

  2. Thanks for your update, Jason.

    In addition to Regeneron/Sanofi (systemic) and Anacor (topical), atopic dermatitis data are coming from Celgene (systemic) and Vitae Pharma (topical). This could become a more crowded space.

    1. I agree, and SNY/REGN set the bar pretty high with dupilumab.